MORTGAGES, and the rates available, are something which may mortgage applicants and borrowers will pay a great deal of attention to. What is the difference between the main mortgage options?

From the amount a person can borrow to the type of mortgage they want in order to pay the money back, there’s a lot to think about when it comes to getting a mortgage. But, with the average mortgage lasting around 25 years, it’s not usually something which a person will stop paying attention to once they’ve secured the loan. It can also be possible to remortgage during this period, which may see the borrower access a cheaper mortgage rate. What is the difference between mortgage options?

Nick Smith, Head of Mortgages at TSB, has explained what the three main types of mortgage are.

He said that these are fixed rate mortgages, tracker rates, and stepped rates.

“Fixed rate mortgages do what they say on the tin,” Mr Smith said.

“The rate of interest is fixed for a specified period which means that no matter what happens to inflation or interest rates during that time, you can plan your life in the certainty that your own mortgage rate won’t change.

“They give you certainty for a specified time period.”

Some people may opt for tracker rates when it comes to their mortgage.

Mortgage rates: The type of mortgage a person gets may come down to personal preference (Image: GETTY)

“These are mortgages where the lender offers you a discount off their ‘Standard Variable Rate’ for a specified time period,” the mortgage expert explained.

“Therefore, if mortgage rates rise or fall during this period, your mortgage payments will as well, but you still have the benefit of the discount.”

Other may prefer stepped rates - which are mortgages which see the interest rate that is paid increase over a certain set amount of time.

Mr Smith said of these mortgages: “These types of mortgages enable you to plan with certainty what your mortgage payments will be over a set period of time.”

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Mortgage rates: A mortgage expert has explained the difference between three main types (Image: GETTY)

Online mortgage broker Trussle asked 2002 participants, but only 24 per cent of respondents could correctly define the term.

Commenting on the research, Dilpreet Bhagrath, Mortgage Expert at Trussle said: “Mortgage terminology can be tricky to understand, and it’s clear that there’s still a lot of jargon in the industry that’s misunderstood.

“Buying a home is one of the biggest emotional and financial commitments someone will make in their lifetime.

“Yet, borrowers are being put at a huge disadvantage by not truly understanding the terminology used in their mortgage agreement.

“It’s worrying that so many homeowners still don’t understand remortgaging, particularly as they risk falling onto an expensive Standard Variable Rate and could waste an average of £4,500 a year on high-interest rates.

“Across the industry, we need to educate borrowers so they understand what they’re getting into and how they can keep their mortgage on track.”